A former desk head at UBS’s London business will argue that unauthorised
trading was “encouraged” by the Swiss Banking Group, a tribunal heard on
Monday.

Sachin Karpe, who was fired from UBS’s wealth management business for unauthorised trading in 39 client accounts, will make the claim as part of his defence against fines imposed by the Financial Services Authority (FSA). Mr Karpe and Laila Karan, a former client adviser, are being fined by the City regulator for causing losses of $42.4m (£27.2m).

“(Mr) Karpe seems to be saying three things, that he had his clients’ implied consent, that the practice was widespread within UBS, and third, that the practice was encouraged,” Jonathan Crow, the FSA’s lawyer, told the tribunal in London. “Karpe’s case is simply illogical ... UBS did not encourage unauthorised trading.”

News from the tribunal comes just weeks after Kweku Adoboli, a former trader in UBS’s investment bank, was charged with causing $2.3bn in losses through alleged unauthorised trading.

Lawyers for Mr Karpe and Mr Karan will present arguments later in the trial. Another defendant, Jaspreet Ahuja, has decided to settle with the FSA.

UBS settled with the FSA in 2009 over the unauthorised trading and agreed to pay an £8m fine.

In a statement, the bank said: “UBS has already acknowledged that there were weaknesses in certain aspects of Wealth Management UK’s control environment. UBS supports the action being taken by the FSA.”

The FSA is also attempting to fine John Pottage, the former chief executive officer of UBS wealth management in the UK, £100,000 for failing to prevent unauthorised trades in the division.